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How Political Rhetoric Stung U.S. Travel Industry

Apr 01, 2010

To say that the hotel industry, which is notorious for boom and bust cycles, has hit another rough patch is a gross understatement. Just ask Roger Dow, president and CEO of the U.S. Travel Association. “If September 11 was the perfect storm, I think it was really just partly cloudy and a chance of rain compared with what we've gone through the past year.” Dow's comments came during a recent speech at the Hunter Hotel Investment Conference in Atlanta.

A deep recession, credit crunch, cuts in airline capacity and wildly fluctuating oil prices are among the problems the U.S. hotel industry has endured since 2008. The result has been the loss of 400,000 travel-related jobs over the past two years, according to the American Hotel & Lodging Association.

That's only part of the story. Early in 2009, the industry received a kick in the teeth. That's when federal lawmakers lashed out at financial institutions that had received government financing through the Troubled Asset Relief Program (TARP) for spending money on lavish business meetings and events. The fallout became known as “the AIG effect”.

Unforgettable hullabaloo

You may recall that in October 2008, the giant insurer AIG was publicly scolded by the White House for spending more than $400,000 on an executive spa retreat at a posh Southern California resort only days after receiving an $85 billion bailout from the federal government.

Although the retreat didn't include employees from the financial products division responsible for the credit default swaps line of business that nearly sank the company, the timing was poor to say the least. The incident made for great theater.

In February 2009, Wells Fargo & Co. canceled a conference in Las Vegas out of concern that it would be roundly criticized if it were to proceed with its plans. Wells Fargo had received $25 billion in TARP funds from the U.S. Treasury, money it never wanted. TARP recipients were trapped in a fish bowl.

The problem is that the meeting cancellations extended far beyond companies that received TARP funding. “Home Depot began canceling its meetings,” says Dow. “Resorts were peeling the name ‘resort and spa’ off their logos, off their signs, off their brochures, off their statements.”

A survey conducted by Meetings & Conventions magazine in early 2009 amid the onslaught showed more than 20% of companies that had not received taxpayer assistance canceled meetings because of the media and political attention.

Reader boards at hotels in Scottsdale, Ariz., began to quietly disappear because the media was lurking, recalls Dow. “If you wanted to know where the investment conference was, you had to go to the front desk because they wanted to keep it a secret.”

The political absurdity inside the Beltway reached a fever pitch when one legislator proposed that no company receiving TARP funds should be able to host a meeting, event or holiday party without a waiver from the Treasury secretary.

Fighting back

The hotel industry had no choice but to push back. “The travel industry is made up of nice boys and girls. We're kind of like the drama club in high school, and we need to become like the football team,” says Dow.

The U.S. Travel Association launched a “Meetings Mean Business” campaign to counter the “political demonization” of business meetings and events. Through an advertising campaign, media interviews and research, the industry got the word out that meetings and events account for 13% of all travel in the U.S., generating $99 billion in spending in 2008 (see table).

Industry leaders also met with President Barack Obama to share their concerns about the dramatic downturn in meetings and events. What was the message delivered? “You can't build an economy by bashing people for going to Las Vegas or the Super Bowl,” says Dow.

To his credit, the president recently signed the Travel Promotion Act into law. The act promotes the United States as a premier destination and explains changing travel security policies to foreign visitors. The initiative is funded through a matching program featuring up to $100 million in private sector contributions and a $10 fee on foreign travelers who do not pay $131 for a visa to enter the United States.

But Dow says there is still more work to be done. “People around Capitol Hill see us as a frivolous industry versus an industry necessary to our economy. We've got to change that. We've got to show why travel matters.”